EPAct 179D Experts

"The least expensive kilowatt, is the one not used."

- Jacob Goldman

National Basketball Association (NBA) & Energy Tax Savings

EPAct-NBA

The National Basketball Association (NBA)
has entered into a partnership with the Natural Resources
Defense Council (NRDC) aimed at having the NBA “reduce its
ecological impact and to help educate basketball fans
worldwide about environmental protection”.
NBA arenas owned by both private commercial enterprises and
designers involved in government owned arenas can use a
variety of tax incentives to accomplish these goals. NBA
basketball arenas are big structures that have the potential
to utilize large Code Sec. 179D Energy Policy Act (EPAct) tax
deductions to help achieve their targeted energy efficiency
goals. Code Sec. 179D provides up to
$1.80-per-square-foot tax deductions each for lighting, HVAC
(heating, ventilation and air-conditioning) and for the
building envelope. Chart 1 presents the potential EPAct Code
Sec. 179D energy efficiency tax deduction benefits for a
sample of the NBA’s current U.S. arenas.

The typical types of energy reducing investments for NBA
arenas that will qualify for the three categories of Code Sec.
179D tax benefits are presented in Chart 1:

Energy Efficient
Lighting

NBA arenas use a lot of electricity for
interior building lighting. Today’s building lighting
products, on average, use 40 to 60 percent less electricity
then those lighting products of only five or six years ago.
The maximum 60-cent-per-square-foot lighting tax deduction is
calculated on a room-by-room basis, which means the main
seating and event area can generate the largest lighting tax
incentive. Specific types of stage and task lighting can be
excluded from the energy efficiency tax calculation making the
strictly building-related energy efficient lighting incentive
easier to obtain.

NBA stadiums are often supported by large parking garages that
can use EPAct tax savings to upgrade to energy lighting. Many
of the parking garages adjacent to NBA arenas use prior
generation probe start metal halide lighting that is energy
inefficient, and as of January 1, 2009, is illegal to
manufacture or import into the United States. To obtain the
30-to-60-cent-per-square-foot tax deductions for parking
garages, the watts per square foot have to meet prescribed
targets.

Energy-Efficient HVAC

One of the largest energy users in NBA
arenas is HVAC (heating, cooling and air conditioning). Arenas
can use highly energy efficient special purpose HVAC
solutions, such as energy recovery ventilation, geothermal and
thermal storage, to greatly reduce energy usage and
potentially qualify for a large EPAct HVAC tax deduction.

Many of the NBA arenas are within city centers where
electricity in particular is supply constrained. A material
reduction in energy use in these facilities will greatly
benefit the communities that support professional basketball.
One HVAC technology that can greatly reduce arena peak time
electrical energy use is thermal storage. With thermal storage
systems, ice is manufactured at night when electricity is in
excess supply and electricity prices are very low. This
inexpensive energy is then used to cool the building down
during the day when electricity is in peak demand and is very
expensive. The one million square foot Wells Fargo Facility
hosts nearly 300 events a year, including games for the NHL’s
Philadelphia Flyers and the NBA’s Philadelphia 76ers. Michael
Ahearn, Vice President of operations for the Wells Fargo
Center in Philadelphia, expressed the benefits of their
thermal storage system this way: “It’s a system that works for
everyone… It helps reduce our expenses and saves energy for
the rest of the community.” NBA arenas that invest in
thermal storage will generally qualify for the
$1.80-per-square-foot tax deduction presented above and those
that already have thermal storage should be positioned to
obtain the $1.80-per-square-foot tax deduction when making
further arena facility energy reducing investments.

Energy-Efficient
Building Envelope

Unlike lighting and HVAC, the building
envelope does not actually consume energy so the
60-cent-per-square-foot Code Sec. 179D arena building envelope
tax deductions will be predicated by achieving energy
efficient lighting, and in particular, HVAC energy efficiency
targets. Qualifying the building envelope items for tax
deductions include roofs, walls, doors, windows, foundation
and insulation.

Accordingly, those arenas that have or are proposing to have
highly energy-efficient measures such as thermal storage or
geothermal, will be positioned to simultaneously achieve large
tax deductions for investments made in qualifying building
envelope items.

Understanding Energy
Modeling

To obtain the HVAC and building envelope
tax deduction, the arena must be modeling in IRS approved
modeling software. Code Sec. 179D lighting tax incentives do
not require modeling. New LEED (Leadership in Energy and
Environmental Design) arenas must be modeled to qualify for
LEED. LEED certification is increasingly being required to be
accomplished for most new government-owned or
government-funded arenas. Some state and utility rebate
incentives require modeling, particularly for large energy
reducing projects. All arenas that have or are
contemplating thermal storage, geothermal or energy recovery
ventilation should strongly consider having their building
modeled to evaluate the building’s performance and then secure
their probable Section 179D tax deductions. Many state
and utility rebate programs will pay all or a portion of
modeling costs pursuant to proposals to make new energy
efficiency investments.

The American Airlines Arena

The American Airlines
Arena is the first NBA arena to achieve the coveted LEED
certification status. According to the April 29th, 2009 press
release, the arena’s energy efficient features include a roof
that reflects heat and an offsite chiller for air
conditioning. Over the past five years, the facility has
maintained its steadfast commitment to environmentally sound
principles and practices – so much so that the facility
completely bypassed its initial LEED Silver goal and achieved
LEED Gold, the first arena in the world to receive LEED Gold
recertification. When compared to other public assembly
facilities, the Arena uses 26.5% less energy per square
foot. In 2014, Miami-Dade County received $1.135 million
from Consolidated Edison Solutions, Inc. resulting from the
federal 179D allocation associated with recent improvements
completed by ConEdison Solutions to the County’s downtown
chilled water system. Our firm, Energy Tax Savers,
directed the tax work related to this project.

Representatives
from ConEdison Solutions present Miami-Dade County with
$1.135 million check.

Conclusion

The NBA Green Initiative presents
tremendous opportunity for energy and tax savings for both
commercial owners and designers involved with government owned
arenas. For the last 12 years the NBA has made large capital
investments in automated computer and software systems to
measure player performance statistics. NBA Executive Vice
President of Operations and Technology, Stephen Hellmuth, said
“You’re not in a league unless you got a statistics
system.” Presuming NBA Commissioner Adam Silver takes
the same approach in monitoring and measuring arena energy
performance while identifying the related tax opportunities,
the NBA can be of great service in helping lead the nation
into an energy-efficient future.

The NBA and the NRDC are hoping that the NBA green initiative
will serve as a model and catalyst for other facility’s green
initiatives. Reducing arena energy uses will serve as a direct
model for the myriad of other inner city athletic facilities
including K-12 school athletic facilities and community
college and university athletic facilities. Indirectly, the
NBA green initiatives will influence many parties since NBA
activities are widely followed and emulated.